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As the digital economy continues to evolve, the U.S. government and a handful of states are beginning to experiment with new strategies for financial resilience, including the creation of Strategic Bitcoin Reserves (“SBR”). An SBR is a financial policy tool where a government entity, such as a U.S. state, allocates a portion of assets to securely hold Bitcoin as a long-term store of value or hedge against economic risks like inflation. SBRs function similarly to traditional strategic reserves of assets like gold, as there is a finite supply of Bitcoin.[1] A government (or corporation or individual investor) might wish to add a non-sovereign asset like Bitcoin to their portfolio with the expectation that such assets will appreciate over time or at least maintain a relatively stable value. Recent SBR legislation passed in several states shows Bitcoin is increasingly being viewed as a long-term financial strategy rather than as a speculative asset. These laws also serve as a marketing strategy to position those states with SBRs as tech-friendly and pro-crypto – particularly in light of shifting priorities under the new administration.

Back in January, the U.S. Board of Governors of the Federal Reserve (the “Federal Reserve”) released its long-awaited discussion paper, “Money and Payments: The U.S. Dollar in the Age of Digital Transformation” (the “Report”), beginning a public dialogue about central bank digital currencies (“CBDCs”) and weighing the merits of a U.S. CBDC.

For the purposes of the Report, a CBDC is defined as a “digital liability of a central bank that is widely available to the general public” and further, a “digital form of paper money.” In this respect, a CBDC is like a stablecoin because a CBDC also seeks to maintain a stable value and become an alternate payment mechanism that can be used to facilitate trading and lending, lessen the friction surrounding cross-border payments, and help foster more financial inclusion. However, unlike a stablecoin backed by reference assets like a national currency, commodities, or another digital asset, a U.S. CBDC (i.e., a digital dollar) would be backed by the full faith and credit of the United States in the same way as a physical dollar and, as described in the Report, would be digital money that is “free from credit risk and liquidity risk.” Thus, as discussed in our recent post on stablecoins, a CBDC enjoys many of the same benefits as stablecoins and, as described in the Report, “could spur innovation by banks and other actors and would be a safer deposit substitute than many other products, including stablecoins and other types of nonbank money.”  Still, the Report suggests that CBDCs may bring their own risks to the safety and stability of the monetary system, particularly during times of financial stress, and otherwise affect the Fed’s ability to implement monetary policy. Plus, there is the added complexity of harnessing and updating the government’s infrastructure to launch such a digital dollar.  On the whole, the Report cautions that a CBDC “could fundamentally change the structure of the U.S. financial system.”

On March 9, 2022, the President issued an Executive Order (the “E.O.”) that articulates a high-level, wide-ranging national strategy for regulating and fostering innovation in the burgeoning digital assets space.  The strategy is intended to encourage innovation yet still provide adequate oversight to control systemic risks and the attendant investor, business, consumer and environmental concerns.

The E.O. is very broad in scope.  It focuses on the myriad of issues associated with “digital assets,” a term defined in a way to capture a wide variety of existing and emerging “crypto” implementations.  Specifically, the E.O. defines digital assets to include “all central bank digital currencies (CBDCs), regardless of the technology used, and to other representations of value, financial assets and instruments, or claims that are used to make payments or investments, or to transmit or exchange funds or the equivalent thereof, that are issued or represented in digital form through the use of distributed ledger technology.” Significantly, the E.O. does not make an attempt at defining the regulatory status of digital assets and notes a digital asset “may be, among other things, a security, a commodity, a derivative, or other financial product.”

While the E.O. itself doesn’t really set forth any new requirements, it puts into motion a process that may yield specific regulatory approaches to digital assets.  Of course, this process is happening in parallel with other initiatives by the Securities and Exchange Commission (“SEC”) and Congress itself and thus, there is a possibility that the E.O will result in approaches that are in ways inconsistent with other ongoing regulatory developments.  For example, in January 2022 the SEC released a proposal that would enhance investor protections and cybersecurity for alternative trading systems that trade Treasuries and other government securities.  The proposal prompted a dissenting statement from SEC Commissioner Hester Peirce (often referred to as “Crypto Mom” for her advocacy of the industry), who objected to the speed and breadth of the January 2022 proposal.  The E.O. sidesteps some of the controversial issues addressed in the SEC proposal, such as how “exchanges” should be defined, as well as the greater issue of how different digital assets should be classified (and therefore, which financial regulatory agencies have jurisdiction over various digital products and platforms). At the same time, there seems to be some amount of bipartisan interest in Congress to pass its own legislation regulating certain aspects of cryptocurrency and related technologies (e.g., in the stablecoin area), Whether or not that legislation would be consistent with the results of the E.O.-driven processes is also hard to tell.

In late May, the Global Shipping Business Network (GSBN), a consortium of ocean carriers and terminal operators, filed a petition with the Federal Maritime Commission (FMC) to obtain an antitrust exemption under the U.S. Shipping Act of 1984. The Act seeks to promote efficient ocean commerce and industry response to…

During congressional debates over the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a relatively novel idea was the focus of proposals from the Senate and House of Representatives: “digital dollars.” Several legislative proposals introduced the idea to address the delay between passage of the CARES Act and distribution of direct stimulus payments to taxpayers, one of the pillars of the act. While the concept did not find its way into the final bill, its inclusion in proposals from both the Senate and House indicate that the viability – and specific application – of a central bank digital currency may be emerging.

In the Senate, Ranking Senator Sherrod Brown (D-OH) introduced the Banking for All Act (BAA) on March 24, 2020. Senator Brown touted the BAA as an avenue for rapid payment of stimulus checks to individuals. Specifically, the BAA would allow all residents and citizens of the United States, and businesses domiciled in the United States, to set up a free digital dollar wallet, called a “FedAccount”, which would be maintained by member national, state and local banks, as well as U.S. Post Offices. A FedAccount would allow a holder “receive payments from the United States pursuant to a Federal law relating to the coronavirus disease 2019 (COVID-19),” as well perform more general tasks such as withdrawing and receiving money, and making payments.

On March 19, 2020, the U.S. Department of Homeland Security, Cybersecurity and Infrastructure Security Agency (CISA), issued Guidance on the essential critical infrastructure workforce needed to ensure national resilience during the COVID-19 response. CISA developed its initial list of critical infrastructure workers to help state and local officials determine which…